Exploring changes in futures prices - Financial Market

Exploring changes in futures prices - Financial Market Essay example
Masters
Essay
Finance & Accounting
Pages 8 (2008 words)
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Name…………………………………………………………………………….xxxxxx Institution……………………………………………………………………….xxxxxx Course……………………………………………………………………………xxxxx Professor………………………………………………………………………….xxxxx @2012 Exploring Changes In Future Price Changes Introduction In this report, the discussion revolves around future contracts, types of futures, history of futures, their use and the factors that influence price changes…

Introduction

This report aims at solving issues and problems related to future price changes and how best they can be used to best suit the needs of the market. Future contracts A future is contract between two parties to buy or sell a financial asset or instrument at a fixed future date and at a predetermined price as argued by Chandra, (2008). Futures are traded in the exchange which acts as an intermediary between the two parties. The terms of future contracts are standardized as they indicate what is to trade, when to trade and where to trade. There are three types of protections built-in to ease credit risk in the futures. One, the daily settlement which is is usually settled in cash basis is a major protection that plays a significant role in easing credit risk. Two, margin which the balance is kept in the accounts to cover several days’ worth of potential market to market transfers. It is necessary for every trader to understand this aspect of margin in reference to credit risk. ...
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